SGR and Health Reform Action Likely in New Congress

But nothing will get done during the "lame duck" session, experts say.

WASHINGTON -- The Affordable Care Act, the sustainable growth rate (SGR) formula for physician reimbursement under Medicare, and reauthorization of the Children's Health Insurance Program (CHIP) are all likely targets for action in the new Republican-controlled Congress, several health policy experts said Wednesday.

"The SGR fix is something they need to deal with," said Douglas Holtz-Eakin, PhD, former director of the Congressional Budget Office and now president of the American Action Forum, a right-leaning Washington think tank. He was referring to a 21.2% cut in physician reimbursement under Medicare that is due to take effect April 1, 2015, unless something is done.

Figuring Out the 'Pay-Fors'

Holtz-Eakin noted that the current Congress has agreed on the basic elements of how to repeal the SGR and replace it with another system -- except on how to pay for it. "I expect them to restart that effort," he said in a phone interview.

The basic plan for replacing the SGR was that "over a 3-to-5-year period you phase out fee-for-service reimbursement and put in place an alternative payment model which would be much more like capitation or bundled payment ... and move doctors into that," Holtz-Eakin explained. "Fee-for-service is dead and everyone knows we need to move to something else."

Tuesday's election results, which will include a Republican takeover of the Senate come January, mean that not much will get done on healthcare in the "lame duck" session that starts next week, he predicted. "The Senate will start confirming judges as fast as [Senate Majority Leader] Harry Reid (D-Nev.) can. That's going to take up a lot of time; very little else will get done. All eyes should be pointed toward 2015."

But Caroline Pearson, vice-president of Avalere, a healthcare consulting firm here, said that even 2015 may be too soon. "My assumption is that the SGR will have a temporary fix," she told MedPage Today in a phone interview. "I don't think the SGR will have a permanent fix ... until after the 2016 election."

Even though Congress may have agreed on all elements of a permanent fix except a way to pay for it, "the 'pay-fors' are everything," Pearson said. "The Republicans are going to ready themselves for a broad entitlement reform debate in hopes of a Republican president, so they are setting up for 2017 entitlement reform, which would include SGR. An SGR fix is unlikely as a stand-alone [bill], and with a divided government."

ACA Mandates in for a Hard Look

In addition to the SGR, the ACA will be in for congressional scrutiny next year, the experts predicted. In particular, "ACA taxes and fees will gain increased attention," Kip Piper, a healthcare consultant here, said in an email. "The penalty under the individual mandate is expected to cause many problems for taxpayers. While repeal of the individual mandate would make insurers quite nervous, a delay is possible."

The Republicans also may take a "symbolic vote" to repeal the entire ACA, just "to get Democrats on record," Piper said, but any such measure would be vetoed by President Obama.

The employer mandate could also come under examination, Holtz-Eakin said, "either getting rid of [it] or changing the threshold" at which an employee is considered full-time and therefore is required to be offered health insurance. The threshold currently stands at 30 hours per week, although the mandate has been delayed until 2016.

The current threshold is bad because "you can too easily take someone working 35 hours and turn them into a part-time employee by dropping them to 29 hours a week," he explained.

The question is what the threshold should be. One option is dropping it to 20 hours per week, "which is generally [recognized] as part-time. That would make more people subject to the mandate, but it's the better policy," said Holtz-Eakin. Or should the mandate be repealed entirely? "Why do you need an employer mandate if you have the individual mandate? It doesn't make any sense."

Dropping the threshold to 20 hours "is a reasonable Democratic proposal, but it's not likely to happen this time," said Pearson, who also said that delaying the mandate might be an option.

She noted that there are two types of employers who are opposed to the employer mandate. The first is firms with a lot of low-wage employees who are currently being offered "mini-med" policies that don't meet the ACA's minimum coverage requirements. "That's one group of constituents that have opposed the mandate, but that's a relatively small bucket," Pearson said.

The other group is employers who are offering insurance that meets the ACA's coverage requirements, but oppose the mandate because of its reporting requirements; that group comprises the majority of the opposition. " The only way to satisfy [the second group] is to delay the mandate so you delay the administrative burden," she said, noting that the paperwork requirement is necessary to enforce the mandate, so it can't be stripped away.

CHIP Reauthorization, Medicaid Changes Possible

Other potentially vulnerable parts of the law include the device tax and the Independent Payment Advisory Board (a group that is supposed to advise Congress on spending cuts in the Medicare program), according to Piper. "These are areas where they could pick up support from some Democrats in the House and Senate."

Another possible area of action is on CHIP reauthorization, said Holtz-Eakin. "The money [for CHIP] runs out at the end of 2015 so they need to do something," he pointed out. "With the combination of the history of CHIP being bipartisan and the need to get something done, look for action in that area."

Changes to the Medicaid program will probably be a mixed bag, if the experts' predictions are any guide. Because several Republicans won in states that have not expanded their Medicaid programs under the ACA, "I don't see any changes in Medicaid expansions," Pearson said. Maine, Wisconsin, and Florida were all states in which Medicaid might have been expanded had a Democrat won the governor's mansion.

On the other hand, Congress may decide to try other things with Medicaid, according to Piper. "This may include legislation to modernize Medicaid and give states greater flexibility," he said in the email. "This could take the form of a genuine block grant-like approach or new program design options without the need of waivers."

Piper added that because "the Obama administration and the president's liberal base strongly favor a federal, top-down approach to Medicaid and are highly suspicious of states, any significant Medicaid reform legislation will probably be vetoed. But it sets up Medicaid reform for after the 2016 election."

On the whole, said Holtz-Eakin, with the new Congress "there's going to be a lot less drama than many people expect. Legislatively you have two routes: use the reconciliation process so you only need a majority vote in the Senate, but anything done that way will get vetoed ... or you pass it the regular way and have to get 60 votes, which means [Republicans] have to work with Democrats."

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